Cross-border shipping legislation— are postal organizations ready?Preparing for the new legislative imperative to seize the potential of international mail

1

October 28, 2010 was a date that changed the international shipping landscape forever. Reported security threats related to suspicious toner cartridges on commercial air cargo sent from Yemen on that day1 prompted a slew of legislative constraints issued by relevant authorities worldwide. Those rules have tightened cargo controls and introduce significant new requirements, effective from as early as 2014, with substantial fines for non-compliance. And while temporary exemptions to these rules were issued for Universal Postal Union mail traffic, those exemptions are soon to expire, meaning that postal organizations would be fully responsible for addressing the new legal requirements. Despite these challenges on the horizon, Accenture estimates as much as 75 percent of postal organizations around the world do not have the postal technology or technical and process capabilities in place to comply with the regulatory demands.

Beyond eCommerce As postal organizations turn to innovation and diversification to reinvent themselves and maintain growth, new demands around international shipments are putting further strain on postal operations.

In recent research by Accenture,2 we found many postal organizations are recognizing the parcels opportunity and are taking full advantage of eCommerce trends. Indeed, according to Euromonitor,3 cross-border e-commerce volume represents more than US$300 billion globally and is growing twice as fast as in-store retailing. However, post-Yemen legislation around cargo and mail from regulatory bodies around the world (such as the European Commission and the United States’ Department of Homeland Security) is forcing postal organizations and carriers to address stringent shipment rules that extend well beyond nascent eCommerce transactions. Despite an existing waiver arrangement for mail traffic traveling under the Universal Postal Union, Accenture considers such waivers are soon to be lifted. Failure to

comply with the law around the ways in which mail transactions are reported means postal operators or air carriers could be liable for fines or be subject to embargoes—potentially creating an impact that will be felt throughout the entire postal community.

According to Accenture research, the number of packages affected by the new legislation across Europe and the United States is approaching 300 million annually. Postal organizations and air carriers that fail to upgrade their existing technologies and processes to meet the new laws risk fines for non-compliance of up to 1,000 euros per item shipped.

With the pressure on to counteract declining mail volumes and meet the changing needs of their business, postal players must consider swift and dramatic changes to their operations and processes to be ready to harness the promise of package growth.

Courting complianceMany CEOs acknowledge that legislative change is necessary, but there are challenges around compliance. The solution for integrators who have control of packages through the entire supply chain is less complex. However, the integration between the dispatching and the receiving postal operator, along with interaction with air carriers and border agencies, creates a much more complicated scenario. Getting this right is not only critical but much harder for postal organizations; the solution must simplify and industrialize the coordination.

So which mail processes are affected? As specified in the new legislation, the steps required are:

• Customers of postal operators need to document information about packages or envelopes, upwards of 250g, on a customs declaration form.

• The postal organization sends the declaration information from the customer to the destination post or country via electronic means.

• The destination post then notifies the destination border agency, which uses the data to undertake a security risk analysis to see if the package is safe or needs to be inspected further.

• The destination post liaises with the origin post on whether to hold, inspect or ship each package.

• The destination post and the destination border agency must maintain data records about the content of bags of mail or containers so that there is transparency around the contents for the benefit of the air carriers.

These complex and interdependent relationships and transactions require a number of essential capabilities which Accenture has identified in Figure 1. These are the areas postal organizations and carriers must attend to now or face complications, such as fines or an inability to ship packages in the future.

There are a number of distinct actions for postal organizations and carriers going forward. Postal organizations will need to update both operational processes and systems for dispatching mail to meet the legislation; air carriers will be required to deploy system updates to interface with postal organizations and border agencies; and postal operators will need to change the processes and systems used to interact with their customers, including their large mailer customers.

Postal organizations and air carriers should begin now to evaluate their compliance readiness and develop plans to implement required process and technology changes. While maintaining essential capabilities, postal agencies must automate to be capable of:

• Communicating with border agencies on declaration data on all packages and actioning the holds they issue

• Mitigating security risks by automating security alert capabilities

• Ensuring every package has a barcode and can be tracked through the network.

Accenture believes that these changes will require at least a year to implement, so it is vital that postal players act now to comply with the legislation.

Promoting postal profits International package shipments are an area of profitable growth for postal organizations. As consumers abandon the high street for the convenience of online purchases—according to

2

Figure 1. Four imperative capabilities

Business process flow

Item induction

Item nesting

Carrier uplift

Despatch close

Receptacle complete

RESDES/RESCON

Item arrival

Border agency

Item departure

Item deliveryConsignment close

Package + customs forms

ITMATT PREDES PRECON

CARDIT

RESDIT(s)Item scan

Item scan

Item scan

Item scan

Item scan

Designated postal operator

International mail processing center

International mail processing center

Domestic delivery center

Do not despatch alert

Pre-dep manifest data

Origin Post

Origin Post

Transport

Destination Post

Border agency declaration information

- Capture- Transmit- Receive

Hold notifications

- Pre-departure- Pre-arrival

Advise

- Mail transaction information- Security information

Track

- In country- External events

Destination Post

“Security is a top priority for European Union (EU) customs. They have to remain Europe’s leading authority to stop dangerous goods from crossing EU borders and keeping European citizens safe. However, the nature of security threats and risks has become more complex in recent years, which is why today I am recommending to Member States new ways forward to better deal with customs risks in future.”

Algirdas Šemeta, Commissioner for Taxation, Customs Union, Anti-Fraud and Audit, European Union5

Accenture research 40 percent of European Union shoppers now use the Internet to buy goods and services4—so the gains from this revenue stream may increase for the postal industry.

Postal players who introduce an efficient solution for international mail that takes effect well in advance of the deadline can continue to grow profitably. And the additional information required on the customs declaration form may serve more than one purpose: apart from meeting the legislation, it could also improve postal processes related to landed costs, pre-payment of duties and taxes and introduce operational efficiencies such as dynamic routing. Each of these offers potential opportunities for postal agencies to reduce costs or increase revenue.

Ignoring the potential growth from international mail and excluding the impact of cross-border products could prove expensive, either in fines or lost revenues. Accenture suggests thinking of compliance in terms of using the latest technologies, together with the right processes, to adopt capabilities that reinforce the relationship with border agencies and air cargo players. Indeed, the legislation offers a positive opportunity to leverage the additional data generated for both import and export mail as a means to realize operational efficiencies and reduce costs. In short, although legal restrictions may have tightened, they have created a chance for postal organizations to seize advantage.

Copyright © 2013 Accenture All rights reserved.

Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

References1 http://www.telegraph.co.uk/news/uknews/terrorism-in-the-uk/8100786/Yemen-cargo-plane-plot-ink-bomb-wasvirtually-undetectable.html2 “Achieving high performance in the postal industry: Research and insights 2013,” Accenture3 http://www.euromonitor.com/4 European Commission Digital Agenda Scoreboard 31 May 20115 http://europa.eu/rapid/press-release_ IP-13-7_en.htm

Contacts

To find out more about the challenges and opportunities of international postal services, please contact:

Brody Buhler robert.b.buhler@accenture.com

About Accenture

Accenture is a global management consulting, technology services and outsourcing company, with approximately 261,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www.accenture.com.

13-1227/02-6444